2021 (5) TMI 79 - AT - Income Tax

Addition u/s 68 - treating the gifts received by the assessee during the year under consideration as unexplained cash credit - HELD THAT - All the four donors who had given the gifts in question to the assessee during the year under consideration were engaged in the business and in the returns of income filed regularly for the year under consideration, the business income earned by them was duly declared as is evident from the photocopies of their IT return acknowledgement. Moreover all the gifts in question were given to the assessee by the four donors by account payee cheques and their declarations confirming the gifts given to the assessee were also furnished on record giving all the relevant particulars including the Permanent Account Number of the donors. As rightly contended by the learned counsel for the assessee, the primary onus to establish the identity and creditworthiness of the concerned donors as well as the genuineness of the relevant transactions involving gifts thus was duly discharged by the assessee by producing the relevant documentary evidence and without bringing on record any material or evidence to disprove or dislodge the claim of the assessee, the authorities below were not justified in treating the gifts received by the assessee as unexplained cash credit u/s 68 merely on the basis of doubts and suspicion - Decided in favour of assessee.

Summary

Issues involved:
Addition of ?4,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Addition of ?4,00,000 as unexplained cash credit
The assessee, engaged in the trading business, received gifts of ?1,00,000 each from four unrelated persons during the year under consideration. The Assessing Officer (AO) treated these gifts as unexplained cash credit due to the failure of the donors to appear before him and the absence of blood relations between the donors and the assessee. The AO added the total amount of ?4,00,000 to the assessee's income under section 68. The assessee contended that the gifts were within the provisions of the Finance Act, 1998, and were made through account payee cheques, indicating genuineness. The Commissioner of Income Tax (Appeals) upheld the AO's decision based on the simultaneous filing of income tax returns by the donors showing identical incomes, raising doubts about the credibility of the gifts. However, the Tribunal observed that the donors were engaged in business, declared their incomes, and provided account payee cheques and declarations confirming the gifts. The Tribunal held that the assessee had discharged the onus of establishing the donors' identity, creditworthiness, and the genuineness of the transactions. The Tribunal concluded that the authorities were unjustified in treating the gifts as unexplained cash credit based on doubts and suspicions, deleting the addition of ?4,00,000 and allowing the appeal of the assessee.

In conclusion, the Tribunal ruled in favor of the assessee, deleting the addition of ?4,00,000 as unexplained cash credit, as the assessee had successfully established the identity, creditworthiness, and genuineness of the gifts received from the donors, who were engaged in business and had provided necessary documentation.